Speaker 1: This is Bloomberg Daybreak Asia for this Monday, April third
Speaker 1: in Hong Kong, Sunday April second in New York. Coming
Speaker 1: up today, OPEC Plus announces a surprise cut in oil
Speaker 1: production of more than a million barrels a day. Tesla
Speaker 1: deliveries rise to a record after the company cut prices
Speaker 1: for evs and ubs. Will reportedly cut staff of up
Speaker 1: to thirty percent after its takeover of Credit Suee China,
Speaker 1: urging Japan not to join the US and the CHIP curbs.
Speaker 1: This comes as Japan asks for the return of a
Speaker 1: detained citizen from Beijing. Trump to be arraigned on Tuesday.
Speaker 1: Explosion in Saint Petersburg kills Russian pro war blogger. I'm
Speaker 1: at Baxter with Global News. That's all straight ahead on
Speaker 1: Bloomberg Daybreak Asia, the business news you need to start
Speaker 1: your day in just one fifteen minute podcast available on Apples, Spotify,
Speaker 1: the Bloomberg Business app and everywhere you get your podcasts.
Speaker 1: Good morning, I'm Richard Salaman and I'm Dak Krisner. Here
Speaker 1: are the stories we're following today, and we're looking at
Speaker 1: OPEC Plus because it announced the surprise oil production cut
Speaker 1: of more than a million barrels a day. It abandoned
Speaker 1: previous assurances that it would hold supply steady. Dumb Closer,
Speaker 1: an analyst at Oil Price Information Service, as the move
Speaker 1: is not a good one for the consumer. This is
Speaker 1: probably worth another three, four or five dollars barrel and
Speaker 1: the price succrued, and that means higher prices for gasoline, diesel,
Speaker 1: jet fuel, you name it. The resulting price hikes could
Speaker 1: cause more inflation, which may force center banks to keep
Speaker 1: interest rates higher for longer. Might house calls OPEC plus
Speaker 1: is a move ill advised under current market conditions. Today,
Speaker 1: Saudi Arabia leather Cartel by pledging its own five hundred
Speaker 1: thousand barrel a day supply reduction. Philommers including Kuwait, the
Speaker 1: United Air Memorates and Algeria follows it, while Russia said
Speaker 1: the production cut was it was implementing from March to
Speaker 1: June would continue until the end of the year. UBS
Speaker 1: is reportedly reducing its workforce by between twenty and thirty percent. Now.
Speaker 1: These job cuts come after UBS completed its takeover of
Speaker 1: Credit Suis. We have more from Bloomberg's Joe n Wang.
Speaker 1: The Swiss newspaper Sontaks item reported as many as eleven
Speaker 1: thousand UBS employees will be laid off in Switzerland and
Speaker 1: another twenty five thousand will be let go worldwide. Both
Speaker 1: UBS and Credit Suis together employed almost one hundred and
Speaker 1: twenty five thousand people at the end of last year.
Speaker 1: Now we hear some firms are gearing up to recruit
Speaker 1: some of the investment bankers and wealth managers likely to
Speaker 1: be let go. They include Joische Bank, Citigroup and JP Morgan. Separately,
Speaker 1: The Financial Times reported Saturday that UBS has a shortlist
Speaker 1: of four management consultants to advise on integrating Credit Suis.
Speaker 1: The newspaper reported UBS is soon to decide between Bain
Speaker 1: and Company, the Boston Consulting Group, McKinsey and Oliver Wyman
Speaker 1: in Hong Kong, Joan Wang, Bloomberg Day Bricasia Well. In
Speaker 1: another development, switch Land's Office of the Attorney General is
Speaker 1: saying it has opened an investigation into UBS's takeover of
Speaker 1: Credit Suite and the department is working to identify possible crimes. Rashard,
Speaker 1: All right, well, let's have a look at Tesla now,
Speaker 1: as it delivered a record four hundred and twenty two thousand,
Speaker 1: eight hundred and seventy five cars worldwide in the first quarter,
Speaker 1: and that compares with the bad what four twenty one
Speaker 1: thousand that anlets have been expecting. Although deliveries were roughly
Speaker 1: in line, Tesla would have to pick up the pace
Speaker 1: of deliveries for the rest of the year. That's according
Speaker 1: to Gene Munster Deepwater Asset Management, saying that Tesla deliveries
Speaker 1: group thirty six percent from a year ago. But months
Speaker 1: have pointed out that CEO Elon Muska's call for fifty
Speaker 1: percent delivery growth during the company's last earnings call. Tesla
Speaker 1: even slash prices early in the year to to boost demand.
Speaker 1: After fourth quarter deliveries are disappointed, Elon Musk and Tesla
Speaker 1: aiming to make between one point eight to two million
Speaker 1: vehicles this year. Well, the inflation data released in the
Speaker 1: US last Friday was below estimates. The core rate of
Speaker 1: the Personal Consumption Expenditures Price Index or PC rose a
Speaker 1: mere three tenths of one percent last month. Now, as
Speaker 1: you know, this is the Fed's preferred measure of inflation.
Speaker 1: This seems to suggest an end of an aggressive rate
Speaker 1: hike cycle, maybe near an end. However, the head of
Speaker 1: the Boston Fed as Susan Collins says it's simply too
Speaker 1: early to assess whether FED policy where it will go next.
Speaker 1: My assessment at the last meeting just last week with
Speaker 1: the summary of economic projections did suggest an additional rate
Speaker 1: hike and then pausing and holding over the year. But
Speaker 1: I need to assess all of the data that's going
Speaker 1: to come in between now and when our next meeting
Speaker 1: is in early May. The new data that I've seen
Speaker 1: just in the past week has not materially changed how
Speaker 1: I'm thinking about things. Boston FED President Susan Collins. There,
Speaker 1: she went on to say the American economy will likely
Speaker 1: see some credit tightening as the result of the recent
Speaker 1: turmoil seen in the banking system, and she said the
Speaker 1: path to easing inflation would not necessarily trigger an economic downturn.
Speaker 1: Rashot Yeah. And meantime, former Treasury Secretary Larry Summers said
Speaker 1: it's too early to give any kind of all clear
Speaker 1: sign on recent financial troubles in the US. Summers said
Speaker 1: that there's well under a fifty percent chance of a
Speaker 1: repeat of the bank runs that brought down Silicon Valley
Speaker 1: Bank and Signature Bank earlier in March, but he did
Speaker 1: say that there could still be some kind of other
Speaker 1: accident that causes a constriction in credit. When you have
Speaker 1: a series of earthquake tremors, it's a fairly long time
Speaker 1: before you should be in a position to be confident
Speaker 1: that you've seen the last of them. And that's why
Speaker 1: the Fed's got such a difficult job. Summer said, it's
Speaker 1: plausible the recent banking woes subside without a big impact
Speaker 1: on credit, leaving in place serious inflation issues. In such
Speaker 1: a scenario, he thinks the fair will have to tighten
Speaker 1: much more than what is already priced into mukets. So
Speaker 1: I think it goes without saying that our top story
Speaker 1: today is this unexpected cut in production of crude oil
Speaker 1: from OPEC plus, and I think it's fair to say
Speaker 1: it's coming at a very inopportune time, just as some
Speaker 1: of this disinflationary force seems to be taking hold. And
Speaker 1: this is undoubtedly going to complicate what the FEED has
Speaker 1: been trying to achieve. The impact of a cut by
Speaker 1: one point one million barrels will likely lead to higher
Speaker 1: inflation expectations in the month ahead. So even if credit
Speaker 1: conditions tighten in the second half as a result of
Speaker 1: a lot of the stress that we have been seeing
Speaker 1: in the banking system, the notion of rate cuts that
Speaker 1: may be a little more difficult to conceive. We're going
Speaker 1: to take a closer look at that dynamic with our
Speaker 1: guest Peter Cheer of Academy Securities. Coming up, and before
Speaker 1: we go to Global news from Dow Jones, McDonald's will
Speaker 1: reportedly close its US offices temporarily this week. The fast
Speaker 1: food chain is preparing to inform corporate employees about layoffs
Speaker 1: as part of a broader restructuring. News is next. China
Speaker 1: is urging Japan to refrain from joining the US in
Speaker 1: restricting the export and access to chip making equipment at Baxter.
Speaker 1: With more from the Bloomberg Newserman San Francisco Eddie. Yeah,
Speaker 1: that's right do. Beijing is saying the US is trying
Speaker 1: to suppress the Chinese semiconductor industry, and the suggestion comes
Speaker 1: with a veiled threat because it comes at the same
Speaker 1: time Japan is asking for the swift return of a
Speaker 1: Japanese citizen being detained in China. Beijing says a chip
Speaker 1: blockade will only strengthen its resolve and chief self reliance.
Speaker 1: China says a US in the past is suppress Japan
Speaker 1: and now is suppressing China. Meanwhile, the US is called
Speaker 1: in the G seven nations to take joint countermeasures if
Speaker 1: China engages an economic coercion. Donald Trump, the first former
Speaker 1: or sitting president to be criminally indicted, is set to
Speaker 1: be processed, photoed, fingerprinted, and arrange and on Tuesday, US.
Speaker 1: His attorney, Joe Tacopino says that Trump will plead not guilty.
Speaker 1: He's gearing up for a battle. You know, this is
Speaker 1: something that obviously we believe it is a political persecution,
Speaker 1: and I think people on both sides of the I'll
Speaker 1: believe that that's a complete abuse of power. Tacopin on
Speaker 1: ABC has heard here on Bloomberg, says they're thinking about
Speaker 1: a motion to move the trial to Staten Island, but
Speaker 1: needs to actually see the charges first. And we're ready
Speaker 1: for this fight, and I look forward to moving this
Speaker 1: thing along as quickly as possible to exonerate him. He says.
Speaker 1: If this case wasn't Donald Trump, it would never have
Speaker 1: gone this far. Now, if there is a trial, the
Speaker 1: key witness will be Trump fixer Michael Cohen on CBS
Speaker 1: has heard here on Bloomberg. Cohen says well, his testimony
Speaker 1: will not be about him. This is solely about accountability.
Speaker 1: I should not be held accountable for Donald Trump's dirty deeds.
Speaker 1: Let him be held accountable. Let those in his orbit
Speaker 1: that are truly accountable, like Bill Barr Right, who he
Speaker 1: used to weaponize the Justice Department against his critics. He
Speaker 1: says he's ready to be a powerful witness. Meanwhile, Donald
Speaker 1: Trump last week on Fox News said that the final analysis,
Speaker 1: Vladimir Putin will win in Ukraine, but ultimately he's going
Speaker 1: to take over all of Ukraine. So should a former
Speaker 1: president be making those kinds of statements. Well, on CNN today,
Speaker 1: the chair of the Foreign Intelligence Committee, Mike Turner said
Speaker 1: that is not a foregone conclusion at all, and people
Speaker 1: should stop making those kinds of statements. He says Putin
Speaker 1: didn't expect the kind of help in Ukraine that Ukraine
Speaker 1: is getting from NATO. Putin has said, this is not
Speaker 1: about Ukraine, this is about Eastern Europe, this is about NATO,
Speaker 1: this is about our allies. And President She of China
Speaker 1: and Putin together said this is a result of they're
Speaker 1: trying to turn back one hundred years. This is authoritarianism
Speaker 1: versus democracy. We all need to be on the side
Speaker 1: of democracy turners. In southern Poland today, an explosion to
Speaker 1: cafe in Saint Petersburg, Russia, has killed Ladin Tatarowski, the
Speaker 1: military blogger who has supported the war in Ukraine. The
Speaker 1: explosion also injured twenty five people. The device was the
Speaker 1: size of a bar of soap, was hidden in a
Speaker 1: statuette presented to him. That's a task report Global News
Speaker 1: powered by more than twenty seven hundred journalist and a
Speaker 1: list in over one hundred twenty countries. In San Francisco,
Speaker 1: I'm Ed Baxter, and this is Bloomberg. Let's get to
Speaker 1: our guest to Peter Cheer is with us. He is
Speaker 1: head of macro strategy at Academy Securities. On the line
Speaker 1: from here in New York City, Peter, it's always a pleasure.
Speaker 1: Thanks so much. Just when the market seemed to be
Speaker 1: taking a little bit of comfort in this reading on
Speaker 1: the PCE that was below forecast, we have an oil
Speaker 1: shock now with OPEC plus cutting production unexpectedly by more
Speaker 1: than a million barrels a day. What does this do
Speaker 1: to the idea that inflation is going to come down
Speaker 1: anytime soon. I think it throws a little bit of
Speaker 1: a rent into that plan. So just this past week
Speaker 1: I highlighted how much freight shipments were down in the US.
Speaker 1: The imports into ports were way down. So it's actually
Speaker 1: not surprising if OPEC is responding because they're probably seeing
Speaker 1: demand for oil's shrink as the economy is slowing. So
Speaker 1: to me, that's a bit of confirmation the economy is slowing.
Speaker 1: That's why OPEC is responding that way. And the flip
Speaker 1: side of this, it's probably a good reminder of the
Speaker 1: geopolitical influences that are around right now, where countries in
Speaker 1: the the least are less dependent on the US than
Speaker 1: they once were and may be I don't want to
Speaker 1: say lashing out, but expressing their frustration at policies towards
Speaker 1: the Middle East at US. The thing is how much
Speaker 1: of an impact will this have on inflation? And that's
Speaker 1: going to be key here is that we look at
Speaker 1: the federal result. I think it's not going to have
Speaker 1: as much as people thinks. Obviously, the price of oil
Speaker 1: is going to go higher. I think it's trading five
Speaker 1: or six dollars a barrel more and that's going to
Speaker 1: put some pressure on the system. But as a whole.
Speaker 1: I think it's in response to the slowing that they're
Speaker 1: seeing that showing up in the data, that freight's turning down,
Speaker 1: that things like the Baltic Drive and turning down. So
Speaker 1: I think it's going to create a little bit of
Speaker 1: inflation fear earlier in the week, But to me, it's
Speaker 1: really going to resonate with the recession is coming crowd
Speaker 1: and people are going to be able to talk about
Speaker 1: ALPEC doing this because they're seeing so much less demand
Speaker 1: because the economy is slowing much more than the official
Speaker 1: data is hinting at. But I'm wondering if we begin
Speaker 1: to see a move up in inflation expectations even before
Speaker 1: some of the data points began to roll over, and
Speaker 1: whether or not that complicates the Fed's job and the
Speaker 1: notion of rate cuts really are taken off the table
Speaker 1: between now and the end of the year. I think
Speaker 1: the FED was already trying to get the rate cuts
Speaker 1: off the table, and they already have an incredibly tough
Speaker 1: job trying to figure out what they've already done had
Speaker 1: they pushed too far, what triggered the crisis with Silicon
Speaker 1: Valley Bank. So they were already in a rock and
Speaker 1: hard place. This is just going to add to that
Speaker 1: pressure right now. With that in mind, I mean, let's
Speaker 1: not forget that. You know, as we see what happened
Speaker 1: with the banks and the liquidity issues, when does this
Speaker 1: also affect credit? And I mean that we got these
Speaker 1: banks who are lightly to be putting up the drool
Speaker 1: bridge is going to be having much stricter criteria for
Speaker 1: making loans and the light that that could, of course
Speaker 1: act as I think they fed themselves suggested between twenty
Speaker 1: five and fifty basis points as tightening, but it could
Speaker 1: be much more surely, So I think it's happening. The
Speaker 1: good news, I guess in some ways is that it
Speaker 1: started happening over a year ago. So when I talked
Speaker 1: to large banks, large institutional lenders, they were already tightening
Speaker 1: credit standards. So this has been in the past, so
Speaker 1: it's going to hurt a little bit more. I think
Speaker 1: what's really difficult to tell is that it's probably going
Speaker 1: to hit small and midsized companies more than the big
Speaker 1: companies or anythink the big companies have been very good
Speaker 1: credits companies that have went to them have done well,
Speaker 1: so I don't think it's going to be dramatic, but
Speaker 1: it is going to be there. I think we're gonna
Speaker 1: have to watch local economies very closely because I think
Speaker 1: this is going to be a very local phenomena. Peter,
Speaker 1: as you know, we saw enormous volatility in US treasuries
Speaker 1: for most of the month of March. In your view
Speaker 1: or things going to be calmer now as we get
Speaker 1: into the second order, I hope so, But the reality
Speaker 1: is I don't think they will be. I think we've
Speaker 1: traded our liquidity system for something that creates the perception
Speaker 1: of liquidity when you don't get big moves, so everything's
Speaker 1: super liquid looking. There's little bit off or costs because
Speaker 1: all these algos are there. But if someone has some
Speaker 1: size to move, liquidity dissipates pretty quickly. And we're heading
Speaker 1: into the summer, so I think this might just be
Speaker 1: a brief respite from that higher volatility. April it's traditionally
Speaker 1: the best, if not one of the best months for equities.
Speaker 1: Are you killing your loins in optimism and an anticipation?
Speaker 1: I am actually not this time. I started being a
Speaker 1: little bit cautious last week. Obviously was wrong. We had
Speaker 1: a nice three and a half percent equity rally in
Speaker 1: the US, and I'm actually getting more cautious. You know,
Speaker 1: I had to rethink about was I wrong, what did
Speaker 1: I miss? And I think the markets got ahead of
Speaker 1: themselves last week, and I'm looking for a bit of
Speaker 1: a pullback and if anything, hopefully for my sake, these
Speaker 1: higher oil prices push us down a little bit on
Speaker 1: I'm curious to get your take on China right now, Peter,
Speaker 1: and how you're viewing what has been a pretty impressive
Speaker 1: reopening story. It may be waning just a little bit
Speaker 1: at the moment, but are you bullish on the China story?
Speaker 1: I am not. I continue to see the one thing
Speaker 1: the US politicians are bipartisan on is their distrust of China,
Speaker 1: and I think that friction is real. I thought it
Speaker 1: was encouraging jack Ma was allegedly back on shore and
Speaker 1: being involved in some things. I just see this long
Speaker 1: term trend that China is less to do with the US,
Speaker 1: and so that's why I can't get too bullish over
Speaker 1: China again. You know, you know sort of seen the
Speaker 1: regulatory I guess a storm Claus disappeared, But you know,
Speaker 1: when you've got something like the breakup of Ali Baba
Speaker 1: doesn't that in any way change that you're thinking, given
Speaker 1: that it perhaps may indicate that they are turning more
Speaker 1: market friendly once again, there's certainly it was an encouraging steps.
Speaker 1: So it made me from Diehardberrish to Okay, let's think
Speaker 1: about what they're doing. But China does play a long game,
Speaker 1: and I can't really tell whether this is a significant
Speaker 1: concession that's going to be good for us in the
Speaker 1: long run, or this is just keeping the wheels turning right.
Speaker 1: I think China is very good every time the US
Speaker 1: pushes hard on it, coming up with some plan that
Speaker 1: lets the US back off and say, Okay, China's playing
Speaker 1: nice again, only to realize six months to a year
Speaker 1: down the road they're not. And I think the earlier
Speaker 1: segment you were talking about China and Japan on chips,
Speaker 1: I think that's a much bigger issue. There's this overall
Speaker 1: almost chip battle going on, and that's going to override
Speaker 1: all the little things that we're seeing. So I just
Speaker 1: can't get that comfortable with China. Well, you mentioned Japan there, Peter,
Speaker 1: And as you know, at the end of the week,
Speaker 1: Harihiko Coroda will end what has been a ten year
Speaker 1: run as the head of the Bank of Japan. A
Speaker 1: new governor, Kazuo Ueita, will take the reins, and there
Speaker 1: had been a lot of speculation as to whether or
Speaker 1: not we're going to see a Polish to shift on
Speaker 1: the part of the BOJ under this new governor. Is
Speaker 1: that something you're expecting. I would expect to see a
Speaker 1: little bit of a shift. They've been somewhat the one outlier,
Speaker 1: I think, as the ECB and FET have been so aggressive.
Speaker 1: Japan has done a few things like these restrictions on
Speaker 1: their targeting of where the tenure has to trade, but
Speaker 1: they've still been relatively easy money. So it would not
Speaker 1: surprise me to see them fold into the world order
Speaker 1: a little bit more and come out a little bit hockey,
Speaker 1: which I think would be a surprise. Well as what's
Speaker 1: his legacy. Yeah, that's a hard one to say. I
Speaker 1: think China, you know, sorry, Japan. The one thing they
Speaker 1: managed to go through this crisis is they did not
Speaker 1: have the inflation that the rest of the world had,
Speaker 1: and that's something I think we're all trying to figure
Speaker 1: out why why not. I do think Japan's actually gonna
Speaker 1: be a really interesting investing story as countries get more
Speaker 1: and more nervous about China and their sphere of influence. Japan,
Speaker 1: I think is a very good foil to that, and
Speaker 1: I'm expecting Japan to actually do very well of the
Speaker 1: coming years. So, Peter, if you had to begin the
Speaker 1: second quarter on taking a long position in markets globally
Speaker 1: right now, is there a case or something that you
Speaker 1: see a scenario that is particularly attractive. I actually like Japan.
Speaker 1: I think is interesting, and I've got to rethink. I
Speaker 1: was actually very bullish energy because I believe a lot
Speaker 1: of people were playing energy from the short side, thinking
Speaker 1: that that was going to be one way to express
Speaker 1: the economic slowdown, and OPEC plus's willingness to restrict that
Speaker 1: might make that trade even more interesting and could help
Speaker 1: energy companies across the globe. What would be your trade though,
Speaker 1: what would be your favorite trade? I like some of
Speaker 1: the European energy companies that are very progressive in terms
Speaker 1: of moving towards sustainability, but have a very good core business.
Speaker 1: So I like that right now, and I would probably
Speaker 1: buy some long dated treasuries, and overall, I would short
Speaker 1: some of the more disruptive things that have moved up recently,
Speaker 1: very quickly Peter on the subject of geopolitics, how are
Speaker 1: you evalue waiting that risk globally right now? So you know,
Speaker 1: at Academy we work for seventeen retire generals and admirals.
Speaker 1: We talked about this all the time. We've felt some
Speaker 1: recent summits. There has not been a time in the
Speaker 1: last five years that we have seen as much geopolitical
Speaker 1: risk out there, and very meaningful geopolitical risk that you
Speaker 1: could see China's selling weapons to Russia, which I think
Speaker 1: would be dramatic for the markets. North Korea is saber
Speaker 1: rattling again, so I'm very nervous and I don't see
Speaker 1: a lot of good outcomes on the geopolitical front. So
Speaker 1: that's something I think the market is not pricing in
Speaker 1: right now. This is Bloomberg day Break Asia. You're a
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